Posts Tagged ‘dual mandate’

Notes From Underground: Trump Moves Markets Without Moving His Fingers

August 21, 2018

The noise just keep on coming and each are disrupting the markets in its own way and the president. Monday’s headlines from the financial press had large impacts on GOLD, COPPER, EQUITIES, and, of course, CURRENCY markets. Let’s look at the substance of the comments.

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Notes From Underground: Fed Creates Jobs by Printing `Data Dependent’ T-Shirts

May 11, 2015

Today, CNBC‘s Steve Liesman interviewed San Fran Fed President John Williams. In a swipe at Fed gallows humor, President Williams presented Liesman with a T-Shirt that said the Fed was DATA DEPENDENT. The humor part was Williams’s effort to cut-off Steve Liesman’s well choreographed question which amounts to: “Come on, John, share your inside view about the possibility of a RATE RISE at the next FOMC meeting (just between us, John).” So as to make sure that Liesman understands the consistent answer: It is data dependent. If the FED wants to create some jobs it can send everyone with a bank account a free “Data Dependent” shirt, compliments of their regional Federal Reserve. All sarcasm aside, President Williams’s view puts added importance now to the inflation data on Friday and of course the retail sales input on Wednesday. The consensus on the CORE RETAIL SALES is 0.3% increase so a strong number would be above 0.6%. If the theory of data dependence holds then it should be the SHORT END of the curve that gets sold and here is my reasoning: The 2/10 and 5/30 parts of the yield curve have steepened dramatically during the last two months as the market accepts the fact that the recent bout of weak economic data has pushed the FED further away from raising rates.

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Notes From Underground: Fed Loses Its Patience While I Regain My Voice

March 17, 2015

Never has so much money been riding on ONE WORD from a monetary authority. The issue isn’t the idea of FED PATIENCE in regards to raising rates for if the FED increases the effective rate to 37 basis points from 12 basis points IT IS MEANINGLESS. The issue for the FED is the huge pile of bank reserves sitting at the central bank to the tune of $2.7 TRILLION (and let’s not forget the FED‘s $4.5 TRILLION balance sheet). If the economy begins to heat up and banks begin to circulate those RESERVES, the FED will have a velocity of money problem as the ECONOMY MAY BE AT SOME LEVEL OF FULL EMPLOYMENT. It’s not an interest rate problem for the FED but a RESERVE PROBLEM.

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Notes From Underground: The Germans Were the Target of IMF, G-20 Animosity

October 13, 2014

Germany was the issue at the IMF and G-20 meetings as all nations suffering economic headwinds delivered harsh criticism of Angela Merkel, Wolfgang Schaueble and, of course, Bundesbank President Jens Weidmann. It was Germany’s continued emphasis on budget restructuring and fiscal soundness that was holding back Europe and resulting in global economic challenges. France can’t grow because the Germans insists on the French authorities bringing their budget down to the prescribed 3 percent of the Maastricht Treaty. The peripheral nations are saddled with private and public sector debt that is not serviceable during times of economic stagnation.

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Notes From Underground: Some Things to Ponder For the Second Quarter

March 31, 2014

As I was reading Zbigniew Brzezinski’s book, The Grand Chessboard (1997), this insight into the Russian desire to resurrect its political stature struck me for its prescience about the significance of present developments in the Eurasian heartland. Brzezinski writes, “However, if Moscow regains control over Ukraine, with its 52 million people and major resources as well as its access to the Black sea, Russia automatically again regains the wherewithal to become a powerful imperial state, spanning Europe and Asia. Ukraine’s loss of independence would have immediate consequences for Central Europe, transforming Poland into the geopolitical pivot on the eastern frontier of a united Europe.”

It is important to understand that the moves by Vladimir Putin have deeper meaning and importance the superficial analysis offered up on the network and financial news channels. This situation is going to be with the markets for a long while and its possible impact on the global financial scene should not be undervalued by the daily movements in the world’s equity markets. Putin seems to be timing his adventure on the basis of a U.S. president who has little desire to entangle itself in any foreign adventures and a Europe so is militarily weak and financially fragile. It seems that Putin has picked a propitious time to test the waters of global fortitude against Russian designs for a resurrection of its influence in the mapping out the future of the Eurasian land mass. Oh, by the way, the Russian rouble closed much stronger for the month after making all-time lows at 36.85 roubles to the dollar on March 3. The rouble ended the day at 35.03 to the dollar. Just putting perspective to overcome much of the noise.

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Notes From Underground: Bernanke and Yellen Are in Lockstep With Policy

March 4, 2013

Friday night Chairman Bernanke delivered a speech on long-term interest rates at the Annual Monetary/Macroeconomics Conference sponsored by the San Francisco Federal Reserve. The basis of his remarks was that the Fed would continue to maintain its robust monetary accommodation because any early extraction may result  in the economy slowing and thus the Fed would have to move to extend the period of aggressive Fed action. It is always important to remember that Ben Bernanke is the main ’37er in the realm of preventing an economic relapse to the deflationary impact of deleveraging. When I say that Chairman Bernanke is a ’37, it refers to the pledge the chairman made to Professor Milton Friedman at the esteemed economist’s 90th birthday party. Bernanke said the Fed made a huge mistake by tightening rates and reserve requirements in 1937 while the U.S. Treasury was instituting an austerity budget at the behest of Secretary Andrew Mellon. It has been Bernanke’s belief that the Fed’s actions coupled with a badly flawed fiscal policy sent the U.S. back into a very severe recession.

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Notes From Underground: WAS BERNANKE HAWKING A HAWKISH OUTLOOK???

June 22, 2011

I feel like I’m the odd analyst out in that Bernanke failed to impress upon me that he is a DOVE in HAWKS’ feathers. Reading the FOMC statement over and over leaves me wondering just what made the statement so strong an anti-inflation stance. The FOMC release reiterated that the FED is relying on closing the output gaps, “including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate for an extended period.” This is not the musings of an inflation HAWK.

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Notes From Underground: Sovereign Wealth Funds aren’t like you and me (they have OPM-Other Peoples Money)

March 14, 2011

The news for most of the day was about Japan and the continuing despair as a result of Friday’s earthquake and tsunami. Markets were fixated on the problems of the nuclear reactors that were severely damaged by the tsunami and whether or not there was going to be a meltdown of the core. The talking heads were dragging out the experts from central casting. Each had an axe to grind on whether they were pro- or anti-nuclear energy. I am certainly no nuclear expert but the best research that was sent my way focused on the importance of the 72-hour period as being the most critical. Hopefully, those nuclear experts are correct and the most significant danger has passed. Many pundits offered opinions that this was the end of the nuclear energy debate for no citizens would want the reactors built in their areas.

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Notes From Underground: MOODY’S Downgrades Greece again, and yet the DOLLAR fails to gain strength

March 7, 2011

Moody’s, the major seers of economic events, has done it again. The Greek sovereign debt rating was lowered and rates on 2-year Greek notes increased to more than 15 percent. Rates on Greek 10-year debt rose to more than 12 percent, yet this is not an inverted curve that one would wish to buy. The group at Moody’s is awakening to the coming dreadful effects of the “NEGATIVE FEEDBACK LOOP.” The more the economy is squeezed, the less tax revenue is collected and that results in a further deterioration of the GREEK BUDGET. The Greek government is going to have to go back to the EU/IMF bailout gurus and ask for further assistance in preventing the next round of financing from causing a greater drain on Greek Government coffers. Imagine the deleterious effects of the Greek polity having to refinance its DEBT at current market rates rather than the considerable lower rates offered through the European Financial Stability Facility (EFSF).

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Notes From Underground: Will the BOE see its Shadow and spring into raising rates?

February 9, 2011

Today, Ben Bernanke went before the new sheriffs in Washington and he maintained the importance of the FED‘s dual mandate. He let Paul Ryan and his comrades unequivocably know that the dual mandate will be fulfilled. Yes, Chairman Bernanke appeared to sign on to the desire of the Republicans’ “mandate” for fiscal rectitude but that is always to be expected from a FED chairman.

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